Sector loses more steam as oil moves higher

PadraicCassidy

NEW YORK (MarketWatch) -- Airline shares moved lower Wednesday, slipping along with the broader equity market as crude-oil futures turned north.

The Amex Airline Index ($XAL) finished down 0.7% at 50.44 points, touching on the benchmark's lowest level since May 16. Frontier Airlines
FRNT
and Southwest Airlines
LUV, +0.26%
were the only two of the benchmark's 11 components to turn higher.

The broader Dow Jones Wilshire Airline Index fell at a similar pace to close at 1,223 points

Investors absorbed May passenger traffic data from several carriers, including U.S. Airways Group, Northwest Airlines Corp. and Alaska Air Group.

U.S. Airways
LCC, -0.50%
said Wednesday its traffic in May rose 0.1% as capacity fell 1.8%, spelling an increase in load factor, or the percentage of seats filled with paying passengers, to 81.5% from 79.9%. The Tempe, Ariz., airline operator also said its unit revenue fell last month.

Alaska Air Group
ALK, +1.30%
said May passenger traffic for its Alaska Air operations rose 5.7% as capacity rose 6.2%. The Seattle-based company's Horizon Air unit had a May traffic increase of 6.1% and a capacity rise of 7.9%.

Late Tuesday, Northwest
NWA, +1.72%
said May traffic was flat compared with the year-ago period as capacity rose 1.9%. Load factor fell 1.6 percentage points to 84.3%, the Eagan, Minn.-based carrier said.

Also making headlines, MAIR Holdings Inc.
MAIR
said Wednesday fourth-quarter loss narrowed to $1.2 million, or 6 cents a share, from $54.1 million, or $2.63 a share, in the year-earlier period. The Minneapolis and St. Paul, Minn.-based regional operator of Big Sky Airlines said it benefited from the resolution of Mesaba Aviation bankruptcy claim with Northwest.

Revenue generated in the three months ended March 31 rose about 6% to $5.8 million from $5.4 million.

Among U.S.-listed shares of foreign carriers, Brazil's GOL Linhas Aereas Inteligentes S.A.
GOL, -1.41%
said its May domestic traffic at GOL airlines rose 37% and capacity increased 35% on a year-over-year basis. Average fares fell by about 21% versus May 2006.

GOL's shares fell 4% to $31.48.

Ryanair shares upgraded

Also, ABN Amro upgraded Ryanair Holdings (RYA)
RYAAY, -0.12%
to buy from hold, saying Tuesday's 7% decline in shares of Europe's largest low-cost airline following a warning that growth will slow this year has created a buying opportunity.

The broker told clients it expects the stock to rally in the next few days, helped by the prospect of share buybacks totaling up to 300 million euros announced on Tuesday. The carrier's U.S.-listed shares fell 31 cents to $38.35.

ABN Amro also said it expects the European Union to block the proposed takeover of rival Aer Lingus, in which Ryanair has accumulated a 25.2% stake. ABN said it wouldn't be surprised if the commission required the disposal of the stake.

For its part, Aer Lingus (AERL) on Wednesday placed an order for 6 Airbus A350-XWBs and 6 A330-300Es valued at $2.4 billion at list prices. The airline, however, said it had negotiated "substantial discounts," with delivery of the first aircraft scheduled in 2009.

The orders will allow Aer Lingus to double its long-haul fleet to 14 Airbus aircraft by 2014. Aer Lingus also took an option to buy a further 6 A350-XWBs for delivery by 2018.

The carrier also said Wednesday that the number of passengers it carried in May rose 5.2% to 815,000, compared to a year ago.

In other broker moves, Raymond James reiterated a strong buy on Ryanair but lowered its 12-month price target on the carrier's shares to $53 from $56.

In energy trading, crude-oil futures moved higher to close near $66 a barrel. See full story.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.